Calif. PUC OKs record breaking contracts for storage

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The California Public Utilities Commission recently approved contracts for four energy storage projects proposed by Pacific Gas and Electric.

The projects were all chosen through a solicitation conducted to find alternatives to renewing reliability-must-run contracts for Calpine gas-fired projects that serve the congested South Bay area.

The PUC said it was seeking longer term, cost efficient solutions to the year-to-year renewal of out-of-market and costly contracts for gas-fired peakers, such as Calpine’s Metcalf plant.

The approved projects represent a total of 567.5 MW and include two of the largest energy storage projects ever proposed.

The approvals are for three power purchase agreements, for projects that developers will build and own, and approval of an engineering-procurement-construction contract for a 182.5 MW project being built by Tesla that will be owned by PG&E. The Tesla project is scheduled to be completed by the end of 2020.

The largest project is a 300 MW energy storage facility that would be built and owned by Vistra Energy subsidiary Dynegy at the company’s Moss Landing plant. The Tesla project is also sited at Moss Landing. The other two power purchase agreements approved are for a 75 MW facility being developed by Hummingbird Energy Storage, an affiliate of esVolta, and a 10 MW project being developed by mNOC AERS Energy Storage. The mNOC project is due to be completed in October 2019. The Hummingbird and Dynegy projects are due to be done by Dec. 1, 2020.

The total estimated costs of the four projects is confidential. But the PUC order said the revenue requirement for 2021 and 2022 for the Moss Landing project is $80.25 million.

The process leading up to the contract approvals was criticized by the state’s Office or Ratepayer Advocates and the Direct Access Customer Coalition, which raised questions about the need for the energy storage projects, their costs and the transparency of the process.

The ORA argued that the storage projects are not needed because the deficiency they are designed to fill will be met with new and planned transmission projects.

The California Independent System Operator has, in fact, approved $14 million in transmission projects that will relieve the congestion in the South Bay-Moss Landing subarea by 400 MW to 600 MW and eliminate the deficiency created by the retirement of Calpine’s Metcalf gas plant. But in the order the PUC wrote that the transmission projects “do not eliminate the growing reliability problem in the region entirely” because they do not guarantee that the Metcalf capacity will not be needed in the future.

In its approval, the PUC accepted that the energy storage projects represent a “reasonable” cost savings to ratepayers based on PG&E’s evaluation methodology that found the contracts represent a “positive market value” to PG&E’s portfolio.

PG&E used a standard of “least cost best fit,” as well as “portfolio adjusted value” to analyze the contract costs and found they offer “greater value than cost to PG&E ratepayers.” The utility also argued that cost alone is not a sufficient basis of comparison because energy storage offers benefits that gas-fired plants do not such as the flexibility to both supply and absorb energy and the fact that the procurements would count toward PG&E’s energy storage procurement requirement.

Under state mandate, PG&E has an energy storage procurement target of 580 MW comprised of 310 MW of transmission connected storage, 165 MW of storage connected to the distribution system, and 85 MW of behind-the-meter energy storage.

The approved contracts would put PG&E in compliance with the transmission connected target.